TMI Blog1985 (10) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... Singh and Princess Rupinder Kumari are individual assessees being assessed to wealth-tax under the Wealth-tax Act, 1957 (hereinafter called the Act ). As regards the former, the two assessment years are 1964-65 and 1965-66, for which the respective valuation dates are March 31, 1964, and March 31, 1965, whereas the assessment year in the case of Princess Rupinder Kumari is 1965-66, for which the valuation date is March 31, 1965. The two assessees had purchased one annuity policy each and they claimed exemption in respect of the value of each policy in each one's assessment to wealth-tax under section 5(1)(vi) of the Act. The value of the annuity policy in the case of Yuvraj Amrinder Singh was ₹ 2,13,000 while in the case of Princess Rupinder Kumari, it was ₹ 2,35,176. Exemption in respect of such value was claimed under section 5(1)(vi) of the Act inasmuch as the annuity policies fell within the expression any policy of insurance occurring in the Said provision. The Wealth-tax Officer rejected the claim and included the abovementioned amounts in the assessees' net wealth for the concerned assessment years on the ground that the exemption was allowable o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll die before the date on which the annuity vests, the amount of the single premium paid but without any interest shall be returned to the proposer or in case he shall be then dead, to his proving executors or administrators or other legal representatives who should take out representation to his estate or limited to the moneys payable under this policy from any court of any State or Territory of the Union of India, or in case the annuitant (provided he is also the proposer) shall have appointed any nominee to receive such money or executed any assignment in favour of any assignee, to such nominee or assignee. (2) In lieu of the payment of the annuity under this policy, the proposer has the option to be exercised before the date on which the annuity vests to receive a cash payment of ₹ 2,88,184 on January 22, 1964. Before dealing with the rival submissions made by the learned counsel for the parties, the relevant provisions of the Act with which we would be concerned may be referred to. Under the charging provision contained in section 3 of the Act, wealth-tax is charged, subject to the other provisions contained in the Act, for every assessment year in respect of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n or other life annuity in respect of past services under an employer. Since a contention was raised that annuity policies of the type with which we are concerned in the case cannot be regarded as life insurance policies, it will be necessary to refer to the definition of life insurance business given in section 2(l 1) of the Insurance Act, 1938. Section 2(l 1) runs thus: 2. (11) 'life insurance business' means the business of effecting contracts of insurance upon human life, including any contract whereby the payment of money is assured on death (except death by accident only) or the happening of any contingency dependent on human life, and any contract which is subject to payment of premiums for a term dependent on human life and shall be deemed to include- (a) the granting of disability and double or triple indemnity accident benefits, if so provided in the contract of insurance, (b) the granting of annuities upon human life; and (c) the granting of superannuation allowances and annuities payable out of any fund applicable solely to the relief and maintenance of persons engaged or who have been engaged in any particular profession, trade or employment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertakes to pay the person for whose benefit the insurance is made, annuity equivalent (either annual or monthly instalments) after a certain age on the happening of a contingency depending upon the duration of human life (e.g., deferred annuity policies). In either case, it is an insurance against the risk of penury and as such is contract of insurance. That contracts of insurance based on human life are effected in one of the two ways mentioned above will be clear from the manner in which the concept of life insurance is understood in the legal and commercial world. In Halsbury's Laws of England, fourth edition, volume 25, page 13, the following passage occurs in para. 7 under the heading Main types of risk : 7. Main types of risk.-For convenience, the different types of insurance business may be classified as follows: (1) marine, aviation and transport insurance ; (2) ordinary long-term insurance; (3) personal accident insurance ; (4) property insurance; (5) liability insurance; (6) motor vehicle insurance ; (7) pecuniary loss insurance; (8) war risks insurance; and (9) industrial assurance. Footnote 2 deals with ordinary long-term insurance business and says ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id during the minority of the life assured under section 15(1) of the Indian Income-tax Act, 1922, this court at page 631 of the Report has observed thus : Life insurance in a broader sense comprises any contract in which one party agrees to pay a given sum upon the happening of a particular event contingent upon the duration of human life, in consideration of the immediate payment of a smaller sum or certain equivalent periodical payments by another party (Halsbury's Laws of England third edition, volume 22, page 273). In the instant case, in each of the two annuity policies, there is term stipulating the event on the happening of which the annuity shall cease or determine and states that the annuity shall cease or determine on the expiry of 35 years calculated from the date on which the annuity vests (January 22, 1964) or at the death of the annuitant, if later . In other words, the monthly payments are guaranteed for a period of 35 years commencing from January 22, 1964, even if the death occurs before the expiry of the period but in case the annuitant lives beyond the said period of 35 years, the monthly payments shall continue to be made till he dies. In view of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, the assessee's interest would be exempt under the aforesaid clause if the moneys under the policy have not become due and payable on the valuation date. It is, therefore, clear that the exemption contemplated by section 5(1)(vi) covers interests of an assessee in all types of insurance policies and the expression any policy of insurance in the said provision would a fortiori attract within its ambit or scope a deferred annuity policy based on human life, it being a species of life insurance policy and, therefore, unless there is some warrant to cut down the ambit or scope of that expression, the right or interest of an assessee in such a policy would be exempt from the charge of wealth-tax unless, of course, any moneys thereunder have become due and payable to the assessee on the valuation date. Counsel for the Revenue urged a two-fold contention in support of the plea that there is such a warrant to cut down the ambit or scope of the expression any insurance policy occurring in section 5(1)(vi) and confine it to life insurance policies of the usual type where in consideration of periodical premia, the stipulated lump sum becomes payable upon the death or happenin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut all this period in a narrow sense as suggested. Secondly, if the main provision and the proviso are read together, the underlined words do not suggest that any narrow construction, much less as urged, was intended and to say so would be missing the real object or purpose of the proviso. In our view, the proper way to read the proviso would be to treat the main provision as creating or granting an exemption and the proviso carving out something from the exemption. The main provision creates an exemption in respect of the assessee's right or interest in any policy of insurance and the proviso seeks to cut down that exemption to a limited extent, namely, whenever there is a policy of insurance in respect whereof periodical premia are payable for a duration of less than 10 years, then, in such a case, a proportionate exemption specified therein will be available to the assessee irrespective of what type of policy it is ; the proviso has no other effect. That such was the object or purpose of inserting the proviso will be clear if regard be had to the relevant part of Notes on Clauses accompanying the Bill and the relevant portion of the speech of the Finance Minister while i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 5(1)(vi) ; in other words, it is urged that it would be incongruous for the Legislature to include commutable annuities on life within the expression assets under section 2(e) on the one hand and at the same time to exempt such annuities from the charge by including them within the expression any policy of insurance under section 5(1)(vi). The contention, in our view, is entirely misconceived, for, in the first place, it proceeds on a wrong assumption that the topic of annuities is exhaustively dealt with under section 2(e)(iv) and, secondly, it ignores the scheme of the Act emerging from the relevant provisions. It is obvious that the postulate of the so-called incongruity that is being suggested on a reading of the two concerned provisions together must be that the topic of annuities has been dealt with exhaustively by section 2(e)(iv). But the postulate is non-existent. That clause (iv) of section 2(e) is not exhaustive of all annuities is clear from the fact that at least two types of annuities are separately and specifically dealt with under sections 5(1)(via) and 5(l)(vii) the former speaks of the assessee's right to receive annuity payable by the Ce ..... X X X X Extracts X X X X X X X X Extracts X X X X
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